Silver prices rose 18% last year. Will it continue the momentum in 2025?
US rate cuts and geopolitical tensions bolstered the appeal of silver last year. In the key London spot market, prices tested a 12-year high of $34.8 an ounce in October and ended the year with a gain of 37 percent. Meanwhile, domestic silver futures posted an 18 percent return, the highest annual return since 2020.
Gold and silver have a strong positive correlation, and it usually exhibits similar price movements. Historically, both are considered precious metals and are often influenced by similar market factors. Last year gold surged more than 27 percent due to positive fundamentals like worsening geopolitical conditions and speculation over US rate cut decisions.
China is the world's largest consumer of silver. The country's rapid industrialization and commitment to renewable energy have driven demand for silver in electronics, solar panels, and other industries. Last year, China’s Central bank unveiled its biggest economic stimulus since the pandemic. The broader than expected package and interest rate cut were expected to restore the manufacturing activity and the demand of industrial metals.
Last year, the tensions in Middle East and Russia-Ukraine war increased the demand optimism in safe assets. Bullion has historically been a crisis hedge due to no credit risk and negative correlation to risk assets. Due to this feature investors tend to flock to silver which is also considered as a safe commodity during times of growing geopolitical tensions.
The 100-bps rate cut by the US Federal Reserve last year
